Australia's free tabloids aim to keep out competitors

By SUE NEALES Melbourne correspondent

A newspaper battle is being fought in Melbourne after foreign media groups flagged their intention to encroach on the daily newspaper market traditionally dominated by News Ltd and Fairfax.

In a bid to protect their valuable morning mastheads, the tabloid Herald-Sun and broadsheet the Age have launched free daily tabloid newspapers to be handed to Melbourne train and tram commuters.

The publications on Monday of Fairfax's Melbourne Express, and News Ltd's MX newspaper are intended to head off moves by London's Daily Mail Group and Sweden's Modern Times to also give away free tabloid newspapers in Melbourne.

Both Fairfax and News Ltd also hope the free papers will attract new readers to their stables, with MX aimed at the 18 to 29-year-old, affluent young commuter market, and the Express at the 25 to 39 demographic group of city workers.

It is expected both media corporations will soon publish similar free commuter newspapers in Sydney once the economics of the Melbourne experiment become clearer.

The newspapers will rely solely on advertising revenue to make a profit. Both employ about 20 additional staff and have 30 to 40 per cent advertising content. The theory behind free city commuter papers, which have become commonplace in London, Stockholm, New York and Chicago in the past three years, is that, with under 25 per cent of young people today reading a daily newspaper, they must attract a whole new generation of readers to the habit.

Fairfax chief executive Fred Hilmer said the Melbourne Express was aimed at appealing to new newspaper readers who were typically young, affluent, urban and eager to know what was happening in their city on a given day.

Despite being rivals, similarities between the Express and MX abound.

They were launched on the same day and are free, 32-page, full-colour tabloids.

Both contain bite-size grabs of daily news, sport, finance and entertainment that can be read easily on an average 20-minute daily train or tram trip to or from work. Both groups are printing and distributing 60,000 copies a day in Melbourne.

But News Ltd has snared an exclusive deal with Melbourne's private railway operators for an undisclosed sum, allowing MX to be handed out by attractive young people dressed in blue and gold T-shirts on 150 train platforms and alongside station ticket boxes and turnstiles.

In six weeks, the young MX team of distributors will disappear and be replaced by MX boxes on station platforms.

In comparison, Fairfax's Express is being distributed around the streets of Melbourne and outside train stations. It also has higher distribution costs, since its morning publication means it must be available at hundreds of train stations and tram stops as commuters make their way to work.

As MX hits the streets at 2.30 pm each afternoon, it need only be distributed in the central CBD and stations as city workers stream out of their offices and head home.

The risk for both News Ltd and Fairfax is that the free tabloids will take sales from their traditional publications.

The Age at present sells a daily average of 200,000 copies, and the Herald-Sun, 550,000.

But in London, Europe and Sweden, where several versions of free daily commuter papers know as Metro are published, the circulations of existing sister newspapers have not been affected.

In fact, says Mr Hilmer, they can act as attractors, boosting the profile of existing serious newspapers like the Age.

The hope of both media groups is that new readers of the Express and MX will eventually graduate to regularly buying the more comprehensive Age and Herald-Sun.

Neither the Daily Mail Group nor The Modern Times company have yet said if they intend to continue publishing their own free commuter papers in Melbourne.

Meanwhile, Fairfax Holdings has been cut to "Marketperform" from "Buy" by Deutsche Bank, on concern its war with News Corp will escalate.

Deutsche analysts lowered operating profit expectations for the current fiscal year by 11.2 per cent, from $A175.1 million ($218 million) to $A155.5 million.